A Basel Update: RMA's Response to the Committee's Consultative Paper.

In February 1998, the Federal Reserve Bank of New York, the Bank of Japan, and the Bank of England hosted a Conference on Capital Regulation in the 21st Century Chairman Greenspan, in a speech delivered at the Conference, discussed "the rapid technological, financial, and institutional changes that are rendering the regulatory capital framework less effectual, if not on the verge of becoming outmoded, with respect to our largest, most complex banking organizations."

At the time, the 1988 Capital Accord had been in place for a decade and was widely credited with promoting financial stability on a global basis. Yet, shortcomings with the Accord were gaining increasing attention. At the same conference, Greenspan said, "Observers both within the regulatory agencies and the banking industry itself are raising warning flags about the current standard." He further noted that changes within the financial services industry "may cause capital ratios as calculated under the existing rules to become increasingly misleading."

While these statements were …